Macro-prudential tools unlikely to be enough to offset risks from issuance of digital currencies
The design of a central bank digital currency (CBDC) is key to preventing financial instability as a result of their issuance, research by the International Monetary Fund concludes.
A team of IMF economists carried out scenario analysis to explore how different approaches to launching CBDCs might play out in the banking sector. A CBDC could create liquidity stresses in the sector by luring away a share of commercial banks’ deposits. The economists note that flows out of the banking sector could
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